BELGIUM: An Introduction to Dispute Resolution: Litigation

The Belgian Judicial System 

The Belgian judicial system operates within the civil law tradition, characterised by a structured set of codified laws that are applied and interpreted by the courts. Belgium is a member of the European Union and a signatory of the European Convention on Human Rights, therefore its judges regularly apply European legislation and are greatly influenced by the case law of the European courts.

The Belgian judicial hierarchy consists of four levels. The first level consists of local courts, namely justice of the peace courts and police courts. Justice of the peace courts handle small claims but also have exclusive jurisdiction over lease disputes.

However, the usual starting point for most legal cases is the court of first instance. Alongside the courts of first instance, there are two specialised courts: the commercial courts (for disputes between undertakings, but also for insolvency proceedings) and the labour law courts (for matters relating to individual labour law and social security).

Each first instance court falls in the judicial district of one of the five courts of appeals of Belgium, where the first instance judgment can be reviewed, with specialised chambers for each type of matter. A Market Court has also been founded in 2016 within the Brussels Court of Appeal to hear cases in relation to specific regulated markets.

The Belgian Supreme Court is the “Cour de cassation”, which deals only with points of law.

Access to justice is fairly easy in Belgium. While a successful party is generally entitled to recover its legal fees (eg, bailiff costs and external counsel’s fees) from the losing party, the amount of counsel fees that can be recovered is based on lump sum amounts set by the lawmaker, varying in most cases based on the value of the dispute.

This has led to a competitive legal market, but also to a significant judicial backlog, especially at the level of the courts of appeal. Courts around the country are trying to address this backlog, notably by promoting ADR.

ADR  

The Belgium legal and judicial systems favour ADR, including conciliation, mediation, expert determination, and arbitration. Recently, the legislature has introduced in all courts specialised chambers for amicable resolution of disputes, composed of judges who assist parties in their confidential discussions (the same judges may not subsequently hear the dispute if no settlement is reached). Belgian judges are also increasingly using their powers to compel parties, ex officio or at the request of one of them, to use ADR.

Arbitration is also regularly used in Belgium. Judicial courts are generally mindful to avoid interference during and after the arbitration process. Belgium is home to several arbitration centres, with CEPANI being the most prominent. The CEPANI Arbitration Rules have been updated on several occasions in recent years, and the centre’s efficiency is praised by Belgian and foreign practitioners alike. The financial importance of disputes submitted to CEPANI arbitration is on the rise. The CEPANI Rules provide for the possibility of resorting to emergency arbitration proceedings (which have been used on several occasions in 2023) or expedited proceedings in certain circumstances.

In 2023, the Belgian Supreme Court issued some significant judgments in relation to arbitration. In one of them (7 April 2023; C.21.0325.N), it reversed its almost 50-year-old case law by holding that disputes on the termination of Belgium-related exclusive distribution agreements can now be arbitrated even when they are governed, per the parties’ choice, by a foreign law (when the EU Rome I Regulation applies).

Class Actions 

In 2014, a class action regime was introduced in Belgium in the Code of Economic Law. Class actions can be brought on behalf of a group of consumers or SMEs by non-profit organisations or public bodies that meet certain legal requirements.

Class actions can only be commenced for alleged violations by an enterprise of its contractual obligations or of specifically enumerated Belgian and European rules that contribute to consumer protection.

Under the current legislation, it is up to the court to decide whether an opt-in or opt-out system applies. However, opt-in is mandatory for consumers/SMEs who do not have their habitual residence/main establishment in Belgium and if physical or moral damage is at issue. According to a draft bill transposing the EU Representative Actions Directive (RAD) into Belgian law, opt-in will become the default system and consumers/SMEs will be able to join the group once liability has been upheld by the court.

So far, ten consumer class actions have been brought, nine of which by the main Belgian consumer protection organisation. The actions concerned different industries (telecom, tech, transportation, automobile, e-commerce and energy) alleging violations of consumer laws in various fields, including data protection, passenger rights, unfair market practices and environmental laws.

Once the RAD is implemented, new entities will be entitled to bring class actions. Therefore, an increase in cross-border class actions in Belgium is anticipated. However, in the absence of a commercial interest in bringing class actions and because of limited funding, the increase in such actions will probably be moderate.

Criminal Litigation – Recent Trends 

Recent prosecutorial trends in Belgium involve ever-increasing attention to social fraud and human trafficking, specifically in the context of (sub)contractor chains in the construction and transportation sectors. Companies resorting to (sub)contractors are more and more exposed to allegations of aiding and abetting social fraud/human trafficking perpetrated by suppliers.

Money laundering prosecutions also remain high on the agenda of Belgian criminal authorities, who tend to initiate prosecutions against financial intermediaries based on mere negligence of their preventive obligations.

The regulatory landscape for corporates in Belgium has become increasingly complex. The enforcement of various regulations (GDPR, MAR, Environmental regulations, etc) has significantly increased the burden of compliance. As a result, there has been a rise in administrative prosecutions of a criminal nature initiated by regulators. This development poses a challenge for in-house counsel, who must now navigate both criminal and administrative law realms.

Finally, the European Public Prosecutor Office is handling an increasing number of cases across the EU, including in Belgium.

Restructuring and Insolvency Litigation 

On 1 September 2023, a new restructuring and insolvency framework entered into force. The reform implemented EU Directive 2019/1023 on restructuring and insolvency in Belgium and amended certain proceedings that already existed.

Notably, the reform has introduced entirely new legal concepts in Belgian law, such as the formation of classes of affected parties and the cross-class cramdown mechanism. It is anticipated that these new and unfamiliar concepts will give rise to litigation in the years to come.

Another notable change is that under the new regime, secured creditors will only be included in the restructuring plan for an amount equal to the value they would receive from their security in a bankruptcy or liquidation scenario, in accordance with the normal ranking of liquidation priorities. Reports valuing the secured assets will therefore become crucial and it is expected that such valuation reports will become the subject of numerous challenges, by secured creditors when they consider the valuation too low, and by unsecured creditors when they are of the opinion that the valuation is too high.

The legislature, following the recent trend, has introduced restrictions on the publicity surrounding rescue and bankruptcy proceedings. This aims to encourage restructuring and going-concern business transfers. The reform has introduced “private” reorganisation proceedings (to which no general publicity is given) and confidential bankruptcy preparation proceedings (“pre-pack”), which allow insolvent companies to prepare a transfer before formal bankruptcy proceedings are opened. The use of these new tools will undoubtedly trigger litigation.